In April 2023, the Law Commission announced the start of its review of the law governing financial remedies on a divorce/dissolution of a civil partnership, and potential recommendations for reform. Its scoping report is set to be published in December 2024.
The current system centres around the Matrimonial Causes Act 1973 (‘MCA 1973’) and is heavily discretionary. Section 25 of the MCA 1973 sets out factors which the courts must consider when making an order for financial provision in connection with divorce. Notably, this includes factors such as each party’s needs, resources and the contribution each has made to the marriage/family.
The court must consider these factors when forming its decision, but ultimately the courts in England and Wales have significant discretion when deciding the weight to attach to each factor on making financial remedy orders. This can make it difficult to advise clients with certainty on likely outcomes.
The case for reform
The MCA 1973 is now over fifty years old, therefore the Law Commission has been tasked with considering whether the current system is still fit for purpose.
The Law Commission will identify issues with the current system and outline options for reform. Amongst other factors, the review will consider potential restrictions on the discretionary powers given to judges; whether maintenance payments to a former spouse/partner should be more restrictive (specifically whether there should be a cap on the duration) and what consideration should be given to the bad behaviour of separating parties when making financial remedy orders. The commission will consider the need for a clear set of principles and potential routes to give more certainty to the system.
London has often been termed the ‘divorce capital of the world’ due to headline grabbing awards that have been made in HNW cases. Disputes generally concern how the main principles of ‘sharing’ and ‘needs’ should be applied. Most issues centre on the nature and true value of the assets (matrimonial, non-matrimonial and whether assets have been matrimonialised). It is likely that the Commission’s report, which will also consider financial remedies in other countries, will pave the way for a more uniform approach.
Consistency and conflict mitigation
Many feel that reform is long overdue and that the current system is not entirely fit for the modern day. On the launch of the review, Justice Minster Lord Bellamy said, “it is in everyone’s interests to remove acrimony from the process wherever possible.” Professor Nicholas Hopkins, law commissioner for property, family and trust law added, “Fifty years since the current law was put in place, it’s essential that we look at whether it is working effectively for all parties.” Baroness Shackleton has suggested that the current law is, “hopelessly out of date.”
Moreover, it is anticipated that reform will lead to a greater focus on the enforceability of nuptial agreements. As long ago as 2014, the Law Commission made recommendations to make them automatically binding (as they are in some other jurisdictions) provided certain safeguards are met. Presently, in England and Wales, pre/post nuptial agreements are not automatically binding, but they are likely to be upheld provided they do not leave a party in (real) need. Noticeably, the courts are seeing an increase in litigation around such agreements. Further guidance and recommendations are to be welcomed.
Pitfalls on the road to reform
The central concern is that by removing or reducing Judicial discretion when making financial orders, the financial weaker party is more likely to be adversely affected. Other, more codified systems lack flexibility to recognise the specific need and circumstances of a case. The current UK system sees the contribution to family life as comparable to the financial contribution.. Notably, the fact one party may have paused their career and therefore significantly reduced their earning capacity in order look after the family is an important consideration for the courts when making financial remedy orders. Giving judges less discretion may in turn run the risk of those in particular financial need ultimately losing out from the reforms.
However, it is generally felt that reform is needed.
The great demand in the court system causes significant delays. Lack of judicial availability leads to hearings getting cancelled, ultimately increasing costs for both parties. Cuts to legal aid funding have forced many to represent themselves under incredibly stressful circumstances. It is hoped that the Law Commission will address these prevalent issues and suggest potential ways to mitigate the disruption caused.
Some family law professionals feel that the terms of reference of the Commission’s report are not broad enough, though. For instance, it is specifically not reviewing the (lack of) legal rights for cohabiting couples or unmarried parents or child maintenance. There are no financial claims available to cohabitees upon relationship breakdown, except for seeking provision for any children, and in some circumstances, making claims for an interest in a property based on financial contributions. Such cases are complex, fact-specific and, sadly, often mean that one party is left in a difficult financial situation. Given that the number of couples cohabiting has increased from 1.5 million in 1996 to 3.6 million in 2021 and is the fastest growing family type. There is clearly need for reform in this area and for the law to adapt to the social reality of modern relationships.
Progress already made
It should be acknowledged that 2024 has seen some positive changes being made to financial remedy proceedings. In April this year, a set of rules was introduced which encourages parties to resolve matters at an early stage and outside of the court system. The courts have actively promoted non-court dispute resolution (NCDR) by making it mandatory for parties to submit information about their engagement in NCDR as opposed to the court system. NCDR can offer a much quicker route to resolve issues for a couple as the abovementioned court delays are avoided, and can be a much more cost-effective option for the parties. Those advising couples will need to actively consider NCDR throughout the life of a case and advise their client’s accordingly. The court now has the power to stay a case to allow parties to explore NCDR and/or impose cost sanctions against those that don’t meaningfully engage.
An increased focus on NCDR will encourage couples considering this option and, in turn, reduce pressure on the courts and ease the problems facing an overburdened and underfunded family justice system. Although recent research by Resolution has shown than the profession will need to get behind this push as well as the need for increased access to legal support through NCDR processes to bring about successful outcomes for families.
Recognising families’ unique circumstances
It is hoped that greater certainty in the financial remedy system will lead to fewer inconsistencies and result in a fairer system in general.
However, discretion has been an integral feature of family law, providing flexibility to adapt and change to meet each family’s unique circumstances. Can there really be a ‘one size fits all’ model that achieves fairness and makes sure people aren’t left in real need?
Most people involved in family justice consider the biggest challenge to reform and improved outcomes for families to be the chronic underfunding of an overstretched court system, leading to significant delays. At the same time, many people struggle to access much needed advice and support. It is to be hoped such concerns feature in the upcoming review.
With the review initially only looking at the scope of further work, we may well be waiting some time for real reform.
Katie Longmate, partner and Louise Bonnici, trainee, in the family team at law firm Russell-Cooke
